How listening to customer needs led one adviser to create her own exchange
Sima Reid is an insurance broker who does not like following others in pursuit of the best products for her clients. It’s about finding the best options on the market for clients of twentytwenty Insurance Services — the Long Beach, Calif.-based brokerage that she founded in 2001 — even if she has to build the technology herself.
In 2013, when clients started asking Reid and her staff of 11 about private benefit exchanges, twentytwenty Insurance undertook a “huge project of analyzing the marketplace,” she recalls. Reid looked at carriers who have exchanges, what competing firms were doing, and talked with 15-plus technology firms that white label exchange technology.
After all that research, Reid says none of the available technology met what she was looking for: a focus on the middle market of 100 to 2,500 employees. “The structure for what was out there was not all that flexible,” she says.
So she built her own exchange, called AISLe20, rolling it out to the first client at the end of 2014.
It has helped her to win and to keep clients. Reid brings the “boutique concept to the next level and is effectively able to compete with those larger benefit groups because she is diligent and finds a way to make it happen,” says Rondda Reid (no relation), vice president of human resources at Costa Mesa, Calif.-based El Pollo Loco, a chain of restaurants west of the Mississippi River. In 2014, Rondda Reid moved the chain’s 5,500 covered lives of both restaurant and corporate center employees to the private exchange.
“I’ve worked with Sima for over 20 years and continue to work with her because of her professionalism, her dedication, her industry knowledge and her dependability,” Rondda Reid says. “[Sima] truly is what I would consider a business partner.”
Building the exchange
There were four main reasons behind Reid’s decision to build her own client exchange.
First, when she started her research, Reid recalls most of the private exchange options that existed were expecting employers to move to a defined contribution structure. But of her clients, even though they understood defined contribution, few wanted to move in that direction. “If a private benefit exchange required defined contribution, that obviously was not a solution for many of our clients,” she says.
Further, many of the options she researched were high priced. “While it seems many of the standalone private benefit exchanges may be reasonably priced, they really aren’t,” Reid says. “They are expensive for broker and employer. Our firm pays for most of the technology for our clients. It was going to be really expensive for us.”
Another reason she launched her own exchange was that many of the solutions on the market required their users to go with some or all of the voluntary providers that are offered through the exchange. “It didn’t give you total flexibility, and that was a problem for many of clients,” she says.
Finally, many of her clients are self-insured. “I felt that was also a problem. If a client is self-insured and you demonstrate that is the most cost-effective, which I think it is,” she says, “you then have to tell your clients, ‘To take advantage of all this technology, you have to get rid of self-funding.’ That would not make logical sense to me.”
In starting her exchange, Reid used the electronic enrollment system she was already working with through Employee Navigator, since there was “no reason to recreate the wheel.” She then built her own private exchange solution on top of that, with custom benefits for each employer and decision-support tools for employees, as well as information about general health topics, including a glossary.
Just some of the carriers she works with include Kaiser, BlueShield, Reliant Standard, Aflac and Transamerica.
The exchange “is a great resource for employees because it offers numerous choices that suit individual needs and also has educational resource tools in the exchange that focus on wellness,” client Rondda Reid says.
Any customer service issues are handled internally at twentytwenty, with staff members assigned to various areas of the program. El Pollo Loco’s employees appreciate that they have choices when it comes to benefits and the fact that Reid and her team are there to answer any questions. “They know El Pollo Loco is looking out for their best interest by offering variety, education and wellness” through the exchange, Rondda Reid says.
Private exchanges across the spectrum are expanding beyond core health benefits — medical, dental and vision insurance — to offer more products, including life, accidental, supplemental health and pet insurance, among others, says Scott Brown, managing director at consultancy Accenture. Exchanges are also expanding into concierge services and telemedicine and retirement, he adds.
It is partially a result of the confluence of private exchanges and benefit administrators. “Employers are looking for continued ways to engage and maintain their population … while driving down costs and increasing employee satisfaction,” he says.
Retirement players are also getting in the game. In February, financial services behemoth Fidelity launched a private health insurance exchange to target small and midsized companies.
“That is the most interesting news related to retirement,” says Paul Lambdin, insurance exchanges and retail practice leader for health plans at Deloitte Consulting in Stamford, Conn.
“For a long time, we were talking about health and wealth,” Lambdin adds. “It is kind of interesting that it took so long.”
At private exchange technology provider Liazon, Alan Cohen, the company’s chief strategy officer and co-founder, says it makes sense to include that in an exchange because health insurance, supplemental, life, disability, etc. are about one thing: money.
“It is about protecting your money for the future, it isn’t about healthcare,” he says. “It is about figuring out whatever your vision of prosperity is. Your vision of where you want your family and your future.”
Insurance products and retirement programs are key components of that vision, Cohen explains. “It is important to understand they all work together. It is the right amount of insurance, right level of protection today that lets you be 20-30 years from where you want to be.”
To date, only a few clients are using Reid’s private exchange. “It is a long-term investment,” she says. “In Southern California, we are not seeing the movement to private benefit exchanges as in other parts of the country.”
Nationwide, for the 2016 benefit plan year, Accenture estimates that 8 million people enrolled in a private exchange — a 35% increase over the prior year. The growth was fueled by midsize employers of 100 to 2,500 employees.
“Things have decelerated a little bit in terms of rapid growth, however 35% growth is significant,” Accenture’s Brown says. “We continue to see interest from employers and continued investment by private benefit exchange operators and those that participate in the space.”
Reid acknowledges that while she expected slow growth, she does not have as many clients on her exchange as she would have hoped for at this point. Like so many benefit ideas in Reid’s 35-year career in benefits, “we know in our gut if it’s a great idea and makes sense. I find it takes time,” she says.
Meanwhile, Brown points to recent partnerships, such as Namely and Cigna, as well as Maxwell Health and Guardian, which separately announced they would be launching private exchanges together in early May, as signs the market is going to pick up again.
It is just the beginning, Brown believes. “We anticipate we will continue to see joint partnerships and continued activity in this space,” he says. “There are still a few [exchange players] that drive the majority of the volume. Those are large benefit consultants. … Everyone is chasing the rabbit.”
Those larger players include Mercer, Willis Towers Watson and Buck Consultants.
“Until you start seeing more millennials in the workforce, as that continues to change the landscape, a lot of brokers are not addressing what is happening in the workforce,” Reid adds.
A private benefit exchange that allows access through a phone and tablet, might be “just a little bit ahead of its time,” she says.
“Being independent allows us to try to be entrepreneurs and innovators, to try to look at what clients need today, but also where do we believe those needs will be in the future?” she adds.
“I think this private benefit exchange we built is ahead of its time. But I’m confident it will allow us to bring something innovative to not only our clients, but also other [independent] brokers.”
If firms are not being innovative, an exchange will get “stale really easily,” she believes. “That is a huge part of why we decided to build our own.”
Reid would be happy to post billboards in Southern California that advertise her option, but as an independent broker, “we don’t have a war chest of dollars we can throw at things,” she says. “We need to be very mindful of what we spend on.”
Instead, she plans to continue demonstrating the exchange and why she believes it makes sense for employers.
For Reid, the next steps include making the message of her exchange’s value proposition even easier for employers to digest. “We can’t stand still. We have to always be looking for new opportunities. New ways to bring a better private exchange to employers and employees,” she says.
“I’m not big on doing things the same way I always have,” Reid adds. “I enjoy challenging things and looking for ways to do new things differently. I believe our firm, at our size, that is what has allowed us to be successful.”
In the next few years overall, Accenture’s Brown predicts more large employers will move over to private exchanges. While the buzz has slowed down, “you will start to see employers move, but you won’t see a flash out of it,” he says. “We saw this in the last year. A lot less public announcements, that is part of the climate.”
Deloitte says 29% of non-private exchange adopters are interested in moving to an exchange, and the majority (62%) are likely to move in the next one-to-two years, late 2015 research found. A further 18% plan to move in 3-5 years.
There will be also be more investments and a focus on employee engagement to tie together a suite of products to hit all of the employer’s population, Deloitte’s Lambdin adds.
Exchanges will extend beyond just open enrollment, as their operators create longer-term cost advantages by positioning an exchange not just as an open enrollment tool, but also as a window into the healthcare system for a consumer, he says. That happens with 365-day-a-year engagement to engage with and understand the consumer. “It really is about creating a package that will meet the needs of employers for sustainable costs over time,” he says, “[while] making employees satisfied as well.”